On Thursday, the yield of the 10-year Treasury note climbed beyond 4% as investors responded to robust jobs data, suggesting the potential for further monetary tightening by the Federal Reserve.
The 10-year Treasury note saw its yield jump 8 basis points to trade at 4.025%, while the yield on the 2-year Treasury note escalated more than 12 basis points, reaching 5.08%. It should be noted that yields and prices share an inverse relationship, with a basis point being equal to 0.01%.
ADP's job report highlighted that private sector employment soared by 497,000 in June, greatly exceeding the Dow Jones' consensus estimate of 220,000. This figure also surpassed the job gain of 267,000 observed in May.
The ADP data, typically deemed less reliable than other employment figures, precedes the official June payrolls report due on Friday. Economists surveyed by Dow Jones predict that 240,000 non-farm jobs were created in June, a decrease from the 339,000 added in May.
However, this robust ADP data may trigger investors to revise their expectations upwards, possibly signaling a resumption of the Fed's rate-hiking activities. The central bank's next interest rate decision is set for July 26.
Federal Reserve Chairman, Jerome Powell, last week emphasized the robust labor market's role as a key factor prompting the central bank's stance for further monetary tightening to temper the economy.
Thus, the employment data could influence the Fed's forthcoming interest rate policy, particularly the speed of potential rate hikes. Last week, Powell did not dismiss the chance of consecutive rate increases, a noticeable change from his earlier comments that implied a more gradual pace of rate hikes, a view shared by his fellow officials at their previous meeting, according to the meeting minutes released on Wednesday.
The minutes further underscored that despite June's rate freeze, the majority of Fed officials anticipate additional rate hikes.